Options for Radical Reforms to Pension Systems: Chilean and Swedish Models Compared

Pension systems are under stress in the whole world. Demographic tendencies, informal labour markets, and distributive designs –inter alia-, coupled with the rigidity of the legislation, and implied financial imbalances, social debate and –sometimes-, reforms. These could be classified into two main categories: parametric and radical reforms. Two models have features to be classified as radical pension reforms in the last decades: Chilean (or AFP) and Swedish (or NDC) models. The central aim of this essay is to compare both radical reforms, at the level of “ideal types”. Doing that, some questions are answered, namely: In what feature do they have differences? Which are the incentives they set to human behaviour in order to meet the goals of the design? Are the models truly different? Which problems do they address and which to they set aside? Moreover, which problems remain unsolved, and what troubles do they add? Here, the intention is to concentrate in the technical aspects of the design intended to solve financial problems of the systems, trying to show the relevant trade offs.Pension systems; AFJP

Mother or Child? Intra-Household Redistribution under Gender-Asymmetric Altruism

In developing societies, social norms typically ascribe differential weights to paternal, maternal and communal (or state) contributions to children's expenses. Individuals internalize these valuations. I examine a Cournot model of voluntary contribution to children's goods in a two-adult household, where both spouses may have marginal rates of substitution across paternal, maternal and communal contributions that differ from unity. I show that a conflict may exist between the interests of parents and those of children. Depending on the marginal rate of substitution between paternal and maternal contributions, a lump-sum redistribution from fathers to mothers may make children better off, but both parents worse off, or vice versa. Additional public contribution funded by a lump-sum tax on either parent may make children better off, but at the cost of both parents. Thus, proposals to redistribute income from fathers to mothers need to take into account socially valorized gendered asymmetries in parental roles. Furthermore, there may exist a conflict, instead of congruence, between women and their children.intra-household distribution, social norms, domestic public good, redistribution

Earnings-related mandatory pensions : concepts for design

The author offers a framework for economic policy on mandatory earnings-related pensions. He does not discuss the gains and losses from mandating insurance and savings, nor the use of this policy as a vehicle for income redistribution. Instead, he concentrates on areas that are less well understood: the microeconomics, the macroeconomics, and the political economy of mandatory pensions. His analysis focuses on three main areas: insurance design, privatization, and degree of funding. In each area, he provides a checklist of design issues, drawn from international experience and economic analysis. For insurance, there are two sets of choices: between flat actuarial factor or individual actuarial factor and between defined benefit or defined contribution (in the sense of financial guarantee). For privatization, the essential choices are between private or nationalized provision, and between private or national demand. For funding, the choices are between funding or not funding, and between apparent funding or pay-as-you-go financing. Some combinations can be discarded. Privatization should not be combined with flat actuarial factors, for example, because private suppliers will compete for access to rents that accrue to workers who are awarded implicit subsidies. Privatization is compatible with apparent funding, but not with pay-as-you-go financing, because in the latter there are no funds to invest in the capital market. The policy choice is ultimately between two coherent designs whose relative advantages and drawbacks the author discusses. One, is an individual actuarial factor with privatized production and demand, with risk explicitly allocated to pensions, and with partial funding. Two, is a flat actuarial factor coupled with nationalized production, pay-as-you-go financing, and statutory promises of fixed real pensions (defined benefit).Banks&Banking Reform,Environmental Economics&Policies,Health Economics&Finance,Insurance&Risk Mitigation,Pensions&Retirement Systems

Should Egalitarians Expropriate Philanthropists?

Wealthy individuals often voluntarily provide public goods that the poor also consume. Such philanthropy is perceived as legitimizing one’s wealth. Governments routinely exempt the rich from taxation on grounds of their charitable expenditure. We examine the normative logic of this exemption. We show that, rather than reducing it, philanthropy may aggravate absolute inequality in welfare achievement, while leaving the change in relative inequality ambiguous. Additionally, philanthropic preferences may increase the effectiveness of policies to redistribute income, instead of weakening them. Consequently, the general normative case for exempting the wealthy from expropriation, on grounds of their public goods contributions, appears dubious.community, public goods, inequality, distribution, philanthropy, egalitarianism

Interregional Redistribution and Budget Institutions under Asymmetric Information

Empirical evidence from the U.S. and the European Union suggests that regions which contribute to interregional redistribution face weaker borrowing constraints than regions which benefit from interregional redistribution. This paper presents an argument in favor of such differentiated budgetary institutions. It develops a two-period model of a federation consisting of two types of regions. The federal government redistributes from one type of regions (contributors) to the other type (recipients). It is shown that a fiscal constitution with lax budget rules for contributors and strict budget rules for recipients solves the self-selection problem the federal government faces in the presence of asymmetric information regarding exogenous characteristics of the regions.asymmetric information, interregional redistribution, borrowing rules

The economics of the telethon: leadership, reciprocity and moral motivation

We run a series of experiments in which subjects have to choose their level of contribution to a pure public good. The design differs from the standard public good game with respect to the decision procedure. Instead of deciding simultaneously in each round, subjects are randomly ordered in a sequence which differs from round to round. We compare sessions in which subjects can observe the exact contributions from earlier decisions ("sequential treatment with information") to sessions in which subjects decide sequentially but cannot observe earlier contributions ("sequential treatment without information"). The results indicate that sequentiality increases the level of contribution to the public good when subjects are informed about the contribution levels of lower ranked subjects while sequentiality alone has no effect on contributions. Moreover, we observe that earlier players try to influence positively the contributions of subsequent decision makers in the sequence, by making a large contribution. Such behaviour is motivated by the belief that subsequent players will reciprocate by also making a large contribution. We also discuss the effect of group size on aggregate contributions. Finally, we conceptualize a model where agents’ preferences incorporate a “weak” moral motivation element. The moral motivation is “weak” in the sense that contributors update their morally ideal level of contribution according to observed behaviours. This suggested qualification of rational contributors fits well with the patterns observed in the lab.

The Public Value Scorecard: A Rejoinder and an Alternative to "Strategic Performance Measurement and Management in Non-Profit Organizations"

Robert Kaplan's Balanced Scorecard has played an important and welcome role in the nonprofit world as nonprofit organizations have struggled to measure their performance. Many nonprofit organizations have taken both general inspiration and specific operational guidance from the ideas advanced in this important work. Their pioneering efforts to apply these concepts to their own particular settings have added a layer of richness to the important concepts. Given the great contribution of this work to helping nonprofits meet the challenge of measuring their performance, it seems both ungracious and unhelpful to criticize it. Yet, as I review the concepts of the Balanced Scorecard, and look closely at the cases of organizations that have tried to use these concepts to measure their performance, I believe that some systematic confusions arise. Further, I think the source of these confusions lies in the fact the basic concepts of the Balanced Scorecard have not been sufficiently adapted from the private, for-profit world where they were born to the world of the nonprofit manager where they are now being applied. Finally, I think a different way of thinking about nonprofit strategy and linking that to performance measurement exists that is simpler that and more reliable for nonprofit organizations to rely upon. The purpose of this paper is to set out these contrarian ideas. This publication is Hauser Center Working Paper No. 18. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers